The acquisition is for an initial indicated resource of 1.3 billion tonnes of coal in the Waterberg coal field, which contains almost 50% of South Africa’s known coal reserves.
The Perth-based company said shareholders today approved the company’s purchase of an initial 35% stake in Temo Coal Mining and Manupont 243, the current sole owners of the prospecting rights and subsidiaries of Namane Resources.
Under the agreement, Gleneagle will initially pay Namane close to $A2.3 million and issue 100 million Gleneagle shares and 50 million options to Namane.
Gleneagle has the option of boosting its stake to 70% by spending up to $15.4 million within a two-year period to advance the project to bankable feasibility study status.
Namane is a subsidiary of black economic empowerment conglomerate Community Investment Holdings which was established in 1995 by South African business leaders Dr Anna Mokgokong and Joe Madungandaba.
As part of the transaction, Mokgokong and Madungandaba will join the Australian Securities Exchange-listed company’s board as non-executive directors.
The agreement with Namane is conditional on Gleneagle dual-listing its shares on the Johannesburg Stock Exchange, which is expected to take place by the end of April.
Gleneagle director Lee Boyd said around 75% of the product from the Waterberg project would be thermal coal, with the balance expected to be export-quality coking coal.
“This means that the company’s growth strategy will encompass both thermal coal mining feeding an IPP (independent power producer) strategy, and coking coal production for export via the world-class Richards Bay Coal Terminal,” he said.
Boyd also said coal as an energy source remained in high demand and accounted for more than 40% of the world’s energy.
“The domestic coal market in South Africa offers a unique set of circumstances requiring immediate and urgent investment in new coal mining capacity and coal-fired power generation,” he added.
The Waterberg coal field is located in close proximity of Matimba and Medupi power stations and has road and rail infrastructure in place.
The news comes after South Africa’s electricity utility ESKOM recently estimated R90–110 billion would need to be invested in coal mines by 2020 – equivalent to 40 new mines being opened.
South Africa is expected to consume 374 million tonnes of coal by 2018, of which ESKOM would require 200Mt to supply all of its power stations including two now under construction.
ESKOM is currently studying potential sites in the Waterberg area for a third power plant expected to produce 5000 megawatts.
Shares in Gleneagle – which was reinstated to the Australian bourse in May last year – closed yesterday’s session 2c higher at 15c.
